Heritage Pub. Co. v. Fishman, 3-86 CIV 74.

• Decision Date: 21 May 1986
• Docket Number: No. 3-86 CIV 74.,3-86 CIV 74.
• Parties: HERITAGE PUBLISHING COMPANY, Plaintiff, v. Sheila FISHMAN, Special Assistant Attorney General, State of Minnesota, Kristine Eiden, Deputy Commissioner of Commerce of the State of Minnesota, Michael A. Hatch, Commissioner of the Department of Commerce of the State of Minnesota, and Hubert Humphrey, Attorney General, State of Minnesota, Defendants.
• Court: U.S. District Court — District of Minnesota

634 F. Supp. 1489

HERITAGE PUBLISHING COMPANY, Plaintiff, v. Sheila FISHMAN, Special Assistant Attorney General, State of Minnesota, Kristine Eiden, Deputy Commissioner of Commerce of the State of Minnesota, Michael A. Hatch, Commissioner of the Department of Commerce of the State of Minnesota, and Hubert Humphrey, Attorney General, State of Minnesota, Defendants.

No. 3-86 CIV 74.

United States District Court, D. Minnesota, Third Division.

May 21, 1986.

COPYRIGHT MATERIAL OMITTED

Meeks & Fox by Timothy Davis Fox, Little Rock, Ark., and Fuchs Law Office by David K. Nightingale, St. Paul, Minn., for plaintiff, Heritage Publ. Co.

Hubert H. Humphrey, III, Atty. Gen., State of Minn. by John L. Kirwin and Sheila S. Fishman, Sp. Asst. Attys. Gen., St. Paul, Minn., for defendants of State of Minn.

MEMORANDUM ORDER

ALSOP, Chief Judge.

The above-entitled matter came before the undersigned on the 18th day of March, 1986, upon the motion of plaintiff for an order of this court declaring certain provisions of the Minnesota Social and Charitable Organizations statute, Minn.Stat. Ch. 309, unconstitutional and preliminarily enjoining the State of Minnesota from enforcing the sections at issue. The parties are commended for the manner in which they have put together an extensive record to assist the court in making this difficult determination. The court has considered the record of the case as it is presently constituted and this memorandum order constitutes the court's findings of fact and conclusions of law as required by Fed.R. Civ.P. 52.

FACTUAL BACKGROUND

Heritage Publishing Company, Inc. (Heritage) is an Arkansas corporation with its principal place of business in North Little Rock, Arkansas. Heritage is a for-profit corporation and employs approximately 400 persons. Primarily, Heritage is engaged in the business of soliciting contributions for non-profit organizations and charities. In connection with this business Heritage also prints various pamphlets for its clients. Heritage conducts this business from offices in Arkansas, Georgia, Ohio, and North Carolina and solicits contributions on behalf of clients in approximately 34 states.

Heritage has been soliciting within Minnesota since at least 1981. In early 1981, Heritage applied to be registered as a professional fund-raiser with the State of Minnesota. As a part of that process, Heritage filed with the Commissioner of Commerce a bond in the amount of $20,000. Heritage has maintained the bond, however, it has never obtained a license to solicit within the state. Despite not having a license, Heritage has solicited on behalf of the Minnesota Special Olympics for approximately four years.

This litigation arose out of Heritage's solicitation in Minnesota on behalf of the American Christian Voice Foundation (ACVF). Pursuant to its agreement with ACVF, Heritage was to solicit money in Minnesota and other states, and print and distribute booklets authored by ACVF. Under the contract, 75% of the money collected was to be retained by Heritage. Heritage also was to retain an additional 10% of the money collected to cover the cost of printing and distributing the booklets. The remaining 15% was to go to ACVF.

Beginning in September, 1985, Heritage solicited funds in Minnesota on behalf of ACVF. Heritage told prospective contributors that they were calling on behalf of the "Minnesota Child Abuse Program". Through its solicitation campaign, Heritage obtained pledges in the amount of $42,000, of which, approximately $19,000 has been collected to date.

During early autumn 1985, the Charities Unit of the Office of the Attorney General received numerous calls regarding the solicitation campaign being conducted by Heritage. After investigating the complaints, the Commissioner of Commerce (Commissioner) on November 4, 1985, issued a cease and desist order and notice of right to hearing to Heritage. The order essentially alleged that Heritage had violated Minnesota's laws regarding charitable solicitations by professional fund-raisers and ordered Heritage to cease all activities as a professional fund-raiser in Minnesota. In response, Heritage filed an application to be licensed as a professional fund-raiser with the Commissioner on November 14, 1985. On December 5, 1985, Heritage appealed the cease and desist order and requested a hearing. On January 14, 1986, the Commissioner denied Heritage's application for a license as a professional fund-raiser and ordered that a hearing on the denial of the license be consolidated with the hearing on the cease and desist order.

The combined hearing was held before an administrative law judge on February 26 and 27, 1986. After making findings of fact and conclusions of law, the administrative law judge recommended to the Commissioner that the cease and desist order be made permanent and that Heritage be denied a license to act as a professional fund-raiser within Minnesota. Because of his involvement in the case before this court, the Commissioner delegated the final decision-making responsibility in the Heritage case to a deputy commissioner. In a findings of fact, conclusions of law and order dated April 7, 1986, the Deputy Commissioner ordered, inter alia, that the cease and desist order issued on November 4, 1985, be made permanent against Heritage, that Heritage's license to be a professional fund-raiser be denied, and that Heritage be ineligible for licensure until November 15, 1986.

On January 27, 1986, Heritage commenced this action challenging the Minnesota statutory scheme regulating charitable fund-raising. In an order dated February 7, 1986, this court denied Heritage's application for a temporary restraining order. On March 18, 1986, the court heard oral arguments on Heritage's motion for a preliminary injunction.

STATUTORY SCHEME

Minnesota has a comprehensive statutory scheme (Chapter 309) regulating charitable fund-raising.¹ For the sake of clarity, the court will outline the statutory scheme paying particular attention to those sections challenged by Heritage.

Chapter 309 requires that all charitable organizations soliciting funds within Minnesota file a registration statement with the Commissioner. Minn.Stat. § 309.52. Further, charitable organizations which receive contributions in excess of $10,000 must file annual reports with the Commissioner. Minn.Stat. § 309.53.

Chapter 309 requires professional fund-raisers who solicit funds on behalf of charitable organizations within Minnesota to be licensed. Minn.Stat. § 309.531, subd. 1. In conjunction with the application for license, the Commissioner can require a professional fund-raiser to post a bond in an amount not exceeding $20,000. Minn.Stat. § 309.531, subd. 2. Further, a professional fund-raiser may not solicit on behalf of a charitable organization unless the fund-raiser provides to the Commissioner written authorization to do so from the charitable organization. Minn.Stat. § 309.531, subd. 3. Finally, § 309.531 provides that the Commissioner may require professional fund-raisers to submit regular financial reports. Minn.Stat. § 309.531, subd. 4.

Chapter 309 provides the Commissioner with the power to deny, suspend, or revoke the license of a professional fund-raiser. Minn.Stat. § 309.532. Specifically, the Commissioner may deny any application, or suspend or revoke any license if he finds:

(1) that the order is in the public interests, and (2) that the applicant, registrant, or licensee:

(a) has filed an application for a license or registration which is incomplete in any material respect or contains any statement which, in light of the circumstances under which it is made, is false or misleading with respect to any material fact;

(b) has engaged in a fraudulent, deceptive, or dishonest practice;

(c) is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of charitable solicitation; or

(d) has violated or failed to comply with any provision of this chapter or any rule or order under this chapter.

Minn.Stat. § 309.532, subd. 1. The Commissioner may also issue an order requiring a licensee applicant or a licensee to show cause why the license application should not be denied or the license should not be revoked or suspended. Minn.Stat. § 309.532, subd. 3. A hearing held pursuant to the order to show cause procedure may be conducted before an administrative law judge and the orders of the Commissioner arising out of this process are subject to judicial review by the Minnesota Court of Appeals. Minn.Stat. § 309.532, subd. 4 and 5; Minn.Stat. Ch. 14.

Chapter 309 also provides that the Commissioner may investigate whether any person has violated or is about to violate the provisions of the chapter. Minn.Stat. § 309.533, subd. 1. In conjunction with this power, the Commissioner may "administer oaths and affirmations, subpoena witnesses and compel their attendance, take evidence and require the production of any books, papers, correspondence, memoranda, agreements or other documents or records which the Commissioner deems relevant or material to the inquiry." Minn. Stat. § 309.533, subd. 2.

The Commissioner has the power to issue a cease and desist order when it appears to him that a person is engaged or is about to engage in conduct constituting a violation of the chapter. Minn.Stat. § 309.534, subd. 1(a). The cease and desist order must state the reason for the entry of the order and must give notice to the respondent of his right to request a hearing. Minn.Stat. § 309.534, subd. 1(a). When requested, a hearing must be held not later than 7 days after the request and the Commissioner's decision must be issued within 20 days of the date of the hearing. Id. As an alternative, the Commissioner may also bring an action in state district court to enjoin the conduct of an individual violating the chapter. Minn.Stat. § 309.534, subd. 1(b).

The chapter...